Home Netflix Use Continues Its Ascension (11/21 PM)

OPEN TRADE:  Monday, 11/17/2014

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Net Neutrality conversations are terrifically important to Netflix, Inc. (NASDAQ:NFLX). The streaming content provider has been forced to enter a number of deals with large ISPs to ensure that its content remains in the fast lane while Congress and the FCC look at the issue. For the last year, I’ve suggested that “nearly one-third” of all Internet traffic (during peak hours) is driven by Netflix – now that number is 35% according to networking company Sandvine Corporation.

Netflix is king of home use

Sandvine’s twice-yearly Global Internet Phenomena Report was released this week and shows Netflix use is up from 32% last year to 35% during peak evening hours in the second half of this year. While Sen. Ted Cruz (R-Texas) calls net neutrality “Obamacare for the Internet,” Netflix and others who read those asinine remarks would certainly disagree. YouTube accounts for 14% of U.S. home Internet traffic.

While Netflix is clearly popular in the home, the site (app) that uses the most mobile bandwidth remains Google’s (NASDAQ:GOOGL) (NASDAQ:GOOG) YouTube at 20% of total mobile use which narrowly beat Facebook’s 19%. Facebook’s home and mobile traffic rose considerably this year given its Autoplay video feature (ad streaming) at the end of the summer.

In addition to home users streaming Netflix and YouTube videos religiously, they are also using the Internet considerably more in general. Use is up somewhere between 30% and 40% with the average user using 20 gigabytes each month. While Facebook, YouTube and Netflix are responsible for the bulk of this, BitTorrent, Amazon, Hulu and torrents also are responsible for this increase.

HBO to have an impact soon?

“With both Netflix and Amazon (NASDAQ:AMZN) Instant Video gaining bandwidth share in North America during 2014, it will be fascinating to see how a standalone HBO Go streaming option will impact networks when it launches in 2015,” said Sandvine president and CEO Dave Caputo in a statement that accompanied the report. “The dynamic streaming video market underscores how important it is that operators around the globe have the business intelligence and big data solutions in place to understand the ever-changing behavior of their subscribers.”

Mobile use also has increased for the average user according to the report and is up to 118 megabytes each month from 102 megabytes in the last report. The popularity of Spotify, Pandora, iTunes, Instagram and Google Cloud among other similar sites are responsible for a good portion of this increase.

http://seekingalpha.com/article/2702465-home-netflix-use-continues-its-ascension

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Future Netflix Pricing Moves Hold Key To Investor Decisions (11/20)

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Summary
  • Netflix erroneously blamed pricing for its lower-than-expected subscriber growth, leading to a 25% drop in share price.
  • Consumer research suggests Netflix could have successfully upped its monthly price to at least $8.99 and even $9.99 for both existing and new subscribers, significantly impacting profitability.
  • More aggressive pricing could double near-term profitability.
  • Netflix analysts and investors should encourage company management to give added focus to the pricing function and consider broader and steeper price increases.

Once again, a U.S. company may be unfairly blaming a price increase for an overall company performance shortfall. In a nutshell, here is what happened at Netflix (NASDAQ:NFLX). Last May, Netflix raised its basic monthly fee for new subscribers by $1, from $7.99 to $8.99 per month; pricing for the company’s 36 million existing domestic subscribers stayed the same. In the third quarter, ended in September, the company missed its domestic new subscriber 1.3 million target by some 300k subscribers and blamed the shortfall on the price increase. Indeed, the headline in U.S. News & World Report the next day blared: “Netflix’s 3rd Quarter Subscriber Growth Falters After Price Increase. Stock Falls 25%”

But was pricing really to blame? A closer look not only says no, it also indicates that management may have made a significant blunder in not extending the price increase to all existing subscribers and, perhaps, should have considered a bigger jump to $9.99. Incredibly, Netflix management inferred on their post-earnings call with analysts that there were as many as five possible reasons for the subscriber miss, but feared that if they were to list all of them the press would accuse them of making excuses. Thus, management took the traditionally easy way out and laid the blame on pricing, without going through the trouble of providing any supporting evidence…

http://seekingalpha.com/article/2700175-future-netflix-pricing-moves-hold-key-to-investor-decisions

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Could Google Really Acquire Netflix, Inc? (11/20 AM)

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While a Google acquisition of Netflix would be in line with the planned changes in YouTube’s business model, Bidness Etc gives you three reasons why this might not happen

CCS Insight expects Google Inc (NASDAQ:GOOG) to acquire Netflix, Inc. (NASDAQ:NFLX) in 2015. Google’s YouTube is planning to move toward a subscription-based model, and given the tech giant’s interest in the online streaming space, one can imagine Google turning its sights toward the world’s largest subscription video-on-demand service, Netflix.

Although it makes sense for Google to acquire Netflix for increasing its exposure to the high-growth online streaming industry, we don’t think the acquisition is possible. Firstly, we believe that Netflix’s management isn’t interested in selling the company. Secondly, Netflix already has a high valuation, and paying an additional premium to the current valuation doesn’t seem probable. Lastly, other kinds of partnerships between Google and Netflix hold more promise than an outright acquisition of one by the other.

Netflix Is Not For Sale

Netflix’s growth has been nothing short of phenomenal, rising from a meager stock price of $30 per share in 2008 to $363 today. The streaming giant’s critics used to say that it would either go bankrupt eventually or would be acquired by a bigger player. They continued to argue that Netflix couldn’t survive the tough competition and wouldn’t be able to sustain costs and grow.

Netflix made critics eat their words, as it went on to become the leader in the subscription-based online streaming industry. With a market value of about $22.8 billion, the mighty Netflix has over 37.2 million domestic subscribers and over 15.8 million international subscribers. Its success is the result of the management’s resolute belief in the company and the strong leadership of CEO Reed Hastings.

The management has been (and we think always will be) against the idea of selling off Netflix. Even when it faced strong criticism and Netflix was in trouble in 2011, the management didn’t succumb to the pressure and refused to sell the company. This reflects the management’s (and especially Mr. Hastings’) attachment to Netflix.

If the management didn’t entertain the idea of selling in the darkest of times, it’s impossible that it would sell now – a time when the company is expanding aggressively, targeting the sky as the limit. So, there seems to be a very low probability of Google being able to acquire Netflix.

A Premium Over Netflix’s Current Valuation Doesn’t Seem Possible

Investors see Netflix as a high-growth tech company. It is often compared to the tech giant Amazon.com, Inc. (NADAQ:AMZN) with respect to its valuations. And given the nature of its business, Netflix can also be compared to the Internet & Catalog Retail Industry for valuation purposes, as the company falls in this sub-industry as per GICS classification.

Netflix is currently trading at a forward P/E of 62.7x. Although this is significantly lower than Amazon’s P/E of 91.7x, the valuation is still about 58% higher than the S&P 500 Internet & Catalog Retail Industry’s P/E of 39.9x.

In addition, Netflix is trading at a premium to both Amazon and the S&P 500 Internet & Catalog Retail Industry with respect to its P/S multiple. Netflix is trading at a forward P/S multiple of 3.3x. This is 127% higher than Amazon’s P/S of 1.45x, and 60% higher than the industry’s 2.07x.

Netflix is a high-growth company, and any company planning to acquire it will have to offer a high premium to its valuation in the market. Considering that Netflix is already valued significantly higher than the industry, paying an additional premium to the current valuation doesn’t make sense.

Google And Netflix Can Figure Out Other Deals

Google’s acquisition of Netflix wouldn’t contribute much in terms of synergies if the former is already planning to make its YouTube a subscription-based service. For Google and Netflix to both benefit from the trend toward online streaming, it would make more sense for Google to capitalize on its expertise of technology for developing such software and devices that can improve Netflix viewers’ experience.

The introduction of devices such as Chromecast by Google will continue to create demand for Netflix by making online streaming easier for viewers. On the other hand, such products will allow Google to benefit from Netflix’s growing subscriber base and other streaming service providers such as Hulu.

Bidness Etc believes that rather than Google acquiring Netflix, it is more probable that Google will increase its focus on the development of such software and equipment that helps improve the online streaming experience, while Netflix will keep its focus on innovating content and pulling in more subscribers toward online streaming.

With the two companies operating in the same industry but targeting different segments, Google and Netflix can be expected to undergo different agreements or partnerships for capitalizing better on the opportunities emerging in the online streaming space. But an outright acquisition of one by the other isn’t happening anytime soon.

 

http://www.bidnessetc.com/29555-could-google-really-acquire-netflix-inc/

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A Price to Sales Analysis: Is Netflix Inc. Stock Expensive Today? (11/18 PM)

OPEN TRADE:  Monday, 11/17/2014

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CLOSE TRADE: Friday, 11/21/2014

NETFLIX logo-on-wall-2_large 11 18 14 ARTICLE

“Netflix (NASDAQ: NFLX ) skeptics like to call the stock “expensive.” And when you look at traditional value metrics that are based on earnings or cash flows, that’s certainly true. But is that really the right way to look at ambitious growth stocks like Netflix? Do valuation methods like discounted cash flow analysis or price-to-earnings ratios even apply to the exploding media subscription market?

After looking at evidence from Netflix, Sirius XM (NASDAQ: SIRI ) , and Pandora Media (NYSE: P ) , I would argue that these stocks require a different approach. Finding better methods to judge their future profits will help you understand these stocks on a whole new level.

And I’m not talking about newfangled metrics such as subscriber growth or discounted fluke triumph expectations. There’s a thoroughly traditional tool available to help you take stock of new media growth phenoms, but this approach is hardly ever mentioned in the same breath as Netflix or Sirius.

Today, we’ll be looking at the price-to-sales ratio — because it works.

What’s wrong with the good old tools? First, let’s think about how the usual tools fail us — and why.

Netflix provides the best examples, so let’s start there. Have you ever seen a crazier chart than this one?…”

http://www.fool.com/investing/high-growth/2014/11/18/a-price-to-sales-analysis-is-netflix-inc-stock-exp.aspx

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Netflix, Inc. (NFLX) Ends Its Public API (11/17 PM)

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CLOSE TRADE: Friday, 11/21/2014

In a move that is not surprising but still disappointing, Netflix has closed it public API, meaning several popular apps will no longer be available

Netflix, Inc. (NASDAQ:NFLX) has shuttered its public API and has taken down a few application with it as well. Developers who have built apps that collected data from Netflix will also be out of service.

Not surprising, but disappointing

Though it does not come as a surprise, the move is rather disappointing for the developers. The online video streaming service locked down its API two years back, not allowing any new developers to gain access. Now even those,who have had the access to the API for years have been “given the boot,” says a report from TechCrunch.

There are very few apps that are allowed as partners, most likely being given access to a private API. InstantWatcher, CanIStreamIt?, Flixster, Fanhattan, Yidio, and a few other lucky ones are carrying on.

Popular apps like A Better Queue, which helped in finding movies on Netflix, are now closing their doors.

“Sadly, it’s the end of the road for A Better Queue. It relied on Netflix’s public API, and Netflix retired the API on November 14th, 2014,” wrote A BetterQueue’s developer Dave Jachimia.

According to TechCrunch, the close of API is for the good as it was not serving its purpose very well.

S.H.I.E.L.D finally on Netflix

Separately, Netflix will air the Agents of S.H.I.E.L.D this week. Many viewers were not happy that the show is not yet available in the SVOD format, even when both Disney and ABC already entered into deal with Netflix, and most of the Marvel movies are already streaming on the service. The online video streaming service will air the show on November 20th.

According to Variety, Marvel Television and Netflix have finally settled on airing Season 1 of Agents of S.H.I.E.L.D. this week. As of now, it is not known why S.H.I.E.L.D. took such a long to hit the digital platform. One possible reason could be that Marvel was expecting more sales from the DVD and Blu-ray release of the show as a debut on a digital platform means the end of physical disc sales.

A similar strategy might have been used for The CW’s Arrow. A week before the Season 3, fans were expecting season 2 to be aired on Netflix, but on the day of the premiere, it was revealed that the Season 2 release has been postponed for unspecified reasons.

http://www.valuewalk.com/2014/11/netflix-inc-nflx-ends-public-api/ 

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How Netflix, Inc. (NFLX) Is Keeping Its Viewers Interested (11/17 AM)

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Netflix has announced four new additions to its content library so far this month. Bidness Etc brings you the updates… 

Netflix, Inc. (NASDAQ:NFLX) is a globally recognized content provider with over 53 million subscribers in nearly 50 countries. The streaming giant keeps surprising both investors and subscribers with announcements regarding new content deals through press releases.

The trick of the game in the content business is to differentiate the service by securing the best and unique content. The online content business is just like TV channels; the better the content being offered, the more views you’ll get.

Netflix knows this and is trying to create an artificial barrier to entry by continuously securing new content for its subscribers. Given its enormous subscriber base, acquiring content for Netflix is relatively easier, as the cost is divided over a larger customer base as compared to its competitors.

The streaming giant has been very active this month with four different additions disclosed through different press releases. Bidness Etc brings you the updates.

November 3, Netflix announced another original animated series, “All Hail King Julien.” The “Madagascar” spinoff will be available to Netflix subscribers in the US, Canada, Latin America, UK, Ireland, the Nordics, Benelux, and France from December 19. The 22-minute episodes of the series will be available throughout the coming year.

The series will have a star-studded cast, with Danny Jacobs and Henry Winkler doing the voice overs. Netflix is optimistic about the new show and expects it to attract audiences of all ages.

This will be an addition to the lineup of original animated series from DreamWorks Animation Skg Inc (NASDAQ:DWA) that are available on Netflix. The company plans to debut 10 more new series on Netflix by the end of next year.

November 10, Netflix announced the launch of another original spinoff series, “Justin Time: The New Adventures.” Based on the international hit TV show, “Justin Time,” the spinoff will be produced in collaboration with Guru Studio. It will comprise 13 half-hour episodes, and will be available to Netflix subscribers by early 2016.

Guru Studio is an internationally acclaimed entertainment company known for producing some of the most successful running shows. Justin Time was Guru’s own original pre-school series. The show won the award for Best Pre-School Series at the 2014 Canadian Screen Awards and has been nominated for other awards as well.

Justin Time: The New Adventures will be an addition to Netflix’s already long list of kids’ series. Netflix believes kids form a major portion of its viewership group. The kids’ series (particularly the original ones) draw the most traffic, and the viewership at times reaches more than 5 million from this group. The company also announced last month that it will be launching two new DreamWorks series to enhance its kids’ library.

November 13, the company announced that it will be adding a new original series, “The Crown.” The first ten episodes of the series will be available across all Netflix territories by 2016.

The series will be produced by award-winning film and TV production company Left Blank Pictures in collaboration with the entertainment industry mammoth Sony Pictures Television. The series’ executive producers will include Academy Award nominees Stephen Daldry and Peter Morgan.

The Crown is a series that tells the story of Queen Elizabeth II. It takes viewers inside Buckingham Palace and 10 Downing Street to tell the inside stories of some of the world’s most famous addresses and how they shaped the course of history to what it is.

The series will span multiple seasons, with each season focusing on the different political rivalries that the Queen had to face during the decade of her reign.

November 13, Netflix made its latest announcement. The company revealed it has secured the rights to produce an original series based on the book, “A Series Of Unfortunate Events.”

Written by Lemony Snicket, the book is an international bestseller that has sold over 65 million copies worldwide and has been translated into 43 languages. It tells the tale of how three orphaned children go on a quest to discover the secret of their parents’ death, and how they end up facing trials and other misfortunes.

Daniel Handler, an author himself and the legal, literary, and social representative of Mr. Snicket, will serve as the executive producer of the series.

Netflix has secured all the legal rights to go ahead with the production. However, it has not disclosed when the actual production will begin or when it will be made available to Netflix’s subscribers.

Through these content additions, Netflix has reinstated its focus on adding original content to its library. The company remains a pioneer of innovation and we expect further content additions this month and in times to come.

http://www.bidnessetc.com/29354-how-netflix-inc-nflx-is-keeping-its-viewers-interested/

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TRADE: NETFLIX — NFLX

OPEN TRADE:  Monday, 11/17/2014

  • BUY CALL:      $405.00…$1.05 suggested premium
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CLOSE TRADE: Friday, 11/21/2014

Netflix-logo 7 31 article

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